What the 2025 BBB H.R. 1 Tax Bill Means for Businesses: 7 Major changes to understand and capitalize on where applicable.

The 2025 tax reform bill—officially named H.R. 1, the “One Big Beautiful Bill”—was signed into law on July 4, 2025. Whether one considers it “beautiful” or not – it is definitely a big deal. The bill contains significant and far-reaching provisions for businesses across every industry. From tax planning to capital investment, R&D, and global structuring, the new law reshapes the strategic playbook for business leaders and provides significant areas of opportunity.

Below, we break down important changes for businesses with a high-level outline of what they mean and ways companies might respond to each. Important to note that vcfo is not a tax firm nor a law firm and our observations are made from the perspective of a Corporate Chief Financial Officer. We recommend you vet specific applications with tax or legal counsel where appropriate. 

In this video, we spotlight some of the most immediate and strategic impacts CFOs and business leaders should be thinking about now with the BBB H.R. 1 Tax Bill. 

1. Corporate Tax Rate Permanently Set at 21%

The first headline provision: the corporate income tax rate of 21% is now permanent. This rate was introduced by the 2017 Tax Cuts and Jobs Act (TCJA) and had been scheduled to revert to 35% in 2026 unless renewed. H.R. 1 removes that expiration date entirely.

Why it matters:

This creates long-term clarity for C corporations, particularly larger companies with global operations or multi-year investment strategies. At 21%, the U.S. now maintains a globally competitive corporate rate—lower than the OECD average and notably below countries like Germany (29.9%) or France (25.8%).

For capital-intensive businesses, this permanence means future project valuations are more reliable. It also strengthens incentives for U.S. reinvestment, as the certainty reduces tax planning friction around rate volatility.

2. 100% Bonus Depreciation Made Permanent

Perhaps the most immediately actionable provision: 100% bonus depreciation is now permanent for qualified property placed in service after January 19, 2025. This includes new or used tangible business assets like equipment, machinery, and certain software.

Why it matters:

A business can now fully expense a $2 million equipment investment in the same tax year—without waiting five or seven years to recover that cost through depreciation. This is a powerful cash flow benefit and a key planning tool.

Industries likely to benefit most:

• Manufacturing
• Logistics and transportation
• Construction
• Data centers and IT infrastructure

This provision also gives small and mid-sized firms greater flexibility to reinvest in growth-driving assets without draining operating cash

3. Full R&D Expensing Restored

In a reversal of the TCJA’s less business-friendly R&D provision, H.R. 1 reinstates immediate expensing of domestic R&D costs. The prior rule required businesses to amortize research expenditures over five years (15 for foreign R&D), starting in 2022.

Now, all U.S.-based R&D spending is fully deductible in the year incurred.

Why it matters:

For companies in sectors like technology, life sciences, aerospace, and advanced manufacturing, this is a major tax advantage. Instead of being forced to spread a $10 million R&D investment over multiple tax years, firms can now deduct it all upfront—improving margins and freeing up cash for further innovation.

This provision also incentivizes relocating R&D back to the U.S., as only domestic expenses qualify

4. Enhanced Deductions for Pass-Through Entities

H.R. 1 permanently enhances the Qualified Business Income (QBI) deduction—originally a 20% deduction for income from S corps, partnerships, and sole proprietorships.

Under the new law:

• The deduction rises to 23% of qualified income.
• A minimum $400 deduction is added for active business owners.
• The phase-out thresholds are more generous, particularly for professional services.

Why it matters:

This is a substantial benefit for small business owners, consultants, real estate professionals, and freelancers—particularly those with net income under $400,000. A business owner with $150,000 in QBI may now deduct $34,500 from taxable income, rather than $30,000 under the old rule.

It also improves the comparative tax treatment of pass-throughs versus C corporations, preserving the diversity of entity structures in the U.S. economy

5. Looser Limits on Interest Deductibility

The TCJA limited interest expense deductions to 30% of adjusted taxable income (EBITDA, then EBIT). H.R. 1 relaxes these restrictions.

Why it matters:

This change supports businesses that rely on debt-financed growth. Real estate developers, private equity funds, infrastructure firms, and large manufacturers all benefit from increased deductibility of interest expenses.

For example, if a company with $10 million in EBITDA carries $4 million in interest expense, it may now deduct more of that amount—cutting its taxable income and conserving cash

6. New Incentives for Multinational Corporations

The bill strengthens tax breaks for companies earning income abroad, including:

• Enhanced Foreign-Derived Intangible Income (FDII) deductions.
• Adjustments to the GILTI (Global Intangible Low-Taxed Income) calculation to soften the effective tax rate.
• Potential new incentives to repatriate offshore earnings.

Why it matters:

These changes make the U.S. tax code even more attractive for global firms with intellectual property or service income abroad. Companies like pharmaceutical manufacturers, cloud software providers, and fintech firms may now shift IP back to U.S. ownership while benefiting from lower effective tax rates on foreign income.

This could result in billions in cross-border restructuring and financial repatriation in the next few years.

7. New Markets Tax Credit Made Permanent

The New Markets Tax Credit (NMTC) which offers tax relief to investors funding businesses and infrastructure in low-income communities—is now permanent.

Why it matters:

Previously renewed on a temporary basis every few years, the NMTC lacked long-term certainty. Now, banks, community development entities, and real estate investors can plan multi-year urban revitalization projects without fearing a lapse in credit availability.

It also supports businesses seeking to align with ESG goals and social equity investment, while creating a clearer financial incentive to expand into underserved regions.

Strategic Takeaways for Business Leaders

• Watch the 2029 Sunset Provisions. Not all provisions are truly “permanent.” Key tax breaks, including R&D expensing and bonus depreciation—are scheduled to expire in 2029, unless extended. Plan strategically. Front-load investments and innovation to take advantage of current tax treatment, while preparing for possible sunset-related changes.
•  R&D Investment. Maximize domestic innovation now while advantageous treatment is in place.
• Entity Structure. Reassess pass-through vs. C Corp tax strategies. 
•  Debt Strategy. Re-evaluate opportunities with your financing mix under new interest deductibility rules. 
• Global Operations. Optimize IP and profit repatriation strategy.
• Capex Planning. Accelerate equipment purchases to lock in 100% depreciation.

Final Thoughts

The 2025 H.R. 1 tax bill will guide planning over the next decade. From tax rate stability to powerful incentives for capital investment and innovation, this bill provides both immediate opportunities and longer-term strategy initiatives.

That said, some key provisions—including bonus depreciation and R&D expensing—are scheduled to sunset in 2029, creating planning urgency now. Whether you're leading a startup or managing a multinational, this is the time to align your strategies with the new reality. Don’t wait until the end of the year. Pause now and consider what opportunities you can capitalize on in 2025.

Want some company thinking through what this means to you? Reach out to our team at vcfo. We have been shoulder to shoulder with more than 6,000 clients, making them stronger and more valuable for 29 years. We are helping many of our clients think through areas of opportunity in the BBB and weave them into their financial strategies. We welcome the opportunity to help you, too.